Tips on Writing a Good RFP for Outsourcing

INTRODUCTION A poorly written request for proposal (RFP) is probably the greatest source of confusion and cause of problems between outsourcing enterprises (purchasers) and the outsourcers (vendors). It is not just that the enterprise has trouble putting what it wants into writing; rather, the enterprise often has little idea of what it wants or needs.

Sometimes organizations are aware of their lack of clear vision, and think they know what they want, but the outsourcer, with much more experience in this area, knows better. Of course outsourcers sometimes think they know best when they just plain do not. In all these cases, purchasing organizations must create an RFP that will attract well-thought-out and reasonable proposals. They also want to create an RFP that sets the basis for a comfortable working relationship throughout a sometimes complicated and expensive project.

A definition by a supply management tools provider gives a good description of what an RFP is:

A request for proposal (RFP) is an invitation for suppliers, often through a bidding process, to submit a proposal on a specific commodity or service. A bidding process is one of the best methods for leveraging a company's negotiating ability and purchasing power with suppliers. The RFP process brings structure to the procurement decision and allows the risks and benefits to be identified clearly upfront.

Following are some tips on writing an RFP for outsourcing activity.

1. Define Your Objectives Clearly

Be very clear on what are the Objectives that you would like to fulfill through the exercise. Is it Cost or Quality or Innovation or something else? Once the Objective is clearly defined, the responses submitted will match with your objectives and you will be able to clearly differentiate between the vendor who understands your needs and suits you the best vs. the most cost-effective vendor.

The overarching goals of the procurement should be clearly defined and prioritized to enable each vendor to create a compelling solution tailored for the enterprise’s particular goals.

2. Ask for What You Need

Once an organization decides to outsource, it is important to articulate in writing exactly what it expects to accomplish. Some enterprises have found it useful to engage an outside outsourcing consultant at this point.

It is essential that the buyer writes down clearly what they intend to buy rather than just asking for what can be supplied. This is equally important for the supplier to understand what is being demanded so that the services or products are built to cater to the customer’s needs accordingly.

Any lack of clarity or room for interpretation in the RFP will introduce a degree of uncertainty into the comparison of each vendor’s proposal, and becomes a potential sticking point when negotiating the final deal.

3. Define Boundaries, Roles & Responsibilities Clearly

Many times the buying organization ends up writing a loose RFP, where the supplier assumes things to be included or excluded and prepares its response accordingly. These assumptions generally end up causing disputes, so it is advised that the buyer should write down clearly, in detail, what is required, what is expected, and what needs to be priced. The RFP must always be as explicit as possible.

For example, it is important to clearly define who will be responsible and accountable for what actions throughout the tenure of the contract; what a technology upgrade means; what defines up time; what defines availability of resource; etc.

4. Define the Performance Criteria

Closely tied to the performance of a service are the specifications that measure how the service is being performed. These performance specifications are generally captured via defined Key Performance Indicators (KPIs) that form a Service Level Agreement (SLA) or series of SLAs.

SLAs should address the most critical dimensions of the vendor’s service as defined by the enterprise. Rather than just the obvious specifications such as application availability, the enterprise may have specific concerns about other aspects of the service such as timely detection and notification of issues (for example, disk space limits), the successful completion of critical business transactions, or even accurate service invoicing. The RFP should include the KPIs that are of interest to the enterprise and the associated performance that is required from the vendor.

5. Think from Vendor’s side

At some point in the process of developing the RFP document, the enterprise should read the RFP from the point of view of a vendor digesting the RFP for the first time. From this revised standpoint, it’s often surprising how many requirements need clarification (due to the use of undefined enterprise-specific terms, assumed vendor knowledge of internal processes or an incomplete description of technical requirements). An effective way to identify such issues is by providing the RFP to a technically competent, yet uninvolved third-party to review, such as an employee from another department.

Summary When used correctly, RFPs are an extremely powerful tool in the sourcing professional’s arsenal. However, RFPs that don’t adequately consider the goals and requirements of the sourcing process are a common cause of serious procurement issues.